The hospitality and retail sectors in the United Kingdom are facing some of the highest effective business tax rates across major industries, putting upward pressure on prices and threatening jobs, according to recent analysis by industry groups. The British Retail Consortium (BRC) reported that for the 2025-26 fiscal year, retail businesses paid the equivalent of 72p in taxes for every £1 of pre-tax profit, while hospitality firms paid 82p.

The combined tax burden for these two sectors amounted to £62 billion, encompassing business rates, employer National Insurance contributions (NICs), value-added tax (VAT), and other government levies. The BRC found that these rates were substantially higher than the average across 11 key economic sectors, which stood at 50p per pound of profit. In contrast, the banking sector faced an effective tax rate of 40.5p.

Allen Simpson, chief executive of UKHospitality, described the figures as “staggering,” asserting that hospitality is overtaxed relative to other industries. He noted that more than 80% of every pound earned by hospitality businesses is taken in taxes, undermining the sector’s ability to generate employment, stimulate growth, and support high street revitalization. Simpson urged the government to ease the tax load, including through increased business rates relief for retail, hospitality, and leisure businesses, as well as targeted assistance for those affected by the upcoming 2026 business rates revaluation.

Both sectors have encountered rising operational costs in the past year. One significant factor has been the increase in employer NICs, following the lowering of the secondary threshold. Meanwhile, pandemic-era relief measures in England were scaled back from a 75% discount on business rates to 40%, before being phased out in favor of higher baseline multipliers and updated property valuations. These changes have occurred amid thin profit margins and subdued consumer spending, forcing many businesses to reconsider staffing levels, pricing strategies, and investment plans.

The BRC and UKHospitality also cautioned that further tax increases could exacerbate existing pressures on the cost of living, with inflation currently at 3.1%, surpassing the Bank of England’s 2% target. The groups stressed the importance of ensuring that tax policy supports rather than hinders the recovery and growth of these vital sectors.